Outsourcing saves buyers money through lower cost. Outsourcing really saves money if the service is free.

To allow organizations to take advantage of low-cost IT infrastructure outsourcing, Appistry provides a software solution that helps companies move their applications to the cloud. The company provides its software at no cost to small and medium-sized users. “We wanted to create an easy way to use our product without the hassle of establishing a commercial relationship with us,” explains Sam Charrington, Vice President of Product Management and Marketing for Appistry.

Appistry is a software company specializing in private cloud computing. It has partnered with GoGrid, which provides infrastructure as a service (IaaS), to present a complete offering. “We make our software available on GoGrid’s infrastructure,” explains Charrington. Since Appistry’s software sits preconfigured on top of GoGrid’s infrastructure, outsourcing buyers can deploy their applications on demand in the cloud “with just a few clicks of a mouse,” says Jack Duffy, GoGrid’s Executive Vice President of Sales and Business Development.

“Companies use our products because they don-t have to run their applications on big iron hardware,” explains Charrington.

Traditionally, Appistry focused on private clouds where companies operate their own data centers. Charrington says Appistry’s core customer base is large-scale users; some customers include FedEx and U.S. government agencies. “They use our products on hundreds of servers,” he reports.

Two years ago the software company launched its Open Distribution program and Appistry CloudIQ Platform “Community Edition.” Charrington says Appistry offers this software free “to lower the barriers of entry and help smaller companies get started easily.”

How Presidio Health uses the free service

Presidio Health is a small, start-up, software-as-a-service (SaaS) provider in the healthcare industry. Its market is emergency room physicians. Typically they are contractors, not employees of the hospital where they work. Presidio Health’s application helps them track the cash payments and insurance reimbursements from the patients they see in the ER.

“Once the patient leaves the ER, a doctor has a 20 percent chance of collecting the money owed,” points out Tom Gregory, CTO for Presidio Health. One of the company’s applications helps the physicians collect their fees.

Under the current insurance system, if one item in the reimbursement document is incorrect, the insurance company will refuse payment. One of Presidio Health’s applications, which sits between the facility and the third-party billing system, collects the demographic and clinical data needed to correctly complete the requisite forms. “The application also shows the doctors where they are leaving money on the table,” adds Gregory. In addition, it analyzes treatment trends to help the physicians make their diagnoses.

Success and an expanding business resulted in growing pains in 2008. These growing pains translated into issues of infrastructure capacity. First came the decision to outsource. “We wanted to focus on the software we were developing for hospitals,” Gregory explains. “We didn’t want to support a full IT staff around the clock to manage the hardware. By using an external provider, we didn-t need to worry about downtime or redundancy. Outsourcing fit our business needs.”

Outsourcing also offered a way to reduce capital expenditures. “We wanted to get more computing power at a lesser price than if we had invested in the necessary hardware and software ourselves. And we wanted the ability to expand the computing power at will,” explains Gregory.

Presidio Health began exploring cloud computing “because you can get more horsepower in the cloud than building your own rack,” Gregory continues.

In addition, cloud computing would allow the company “to grow quicker.” The five-person company currently processes 150,000 patient records a year. By the end of 2010 Presidio Health wants to process 16 times that, says Gregory. (That growth is possible because the provider is introducing two new products.)

GoGrid’s Duffy says in the end Presidio Health chose an external provider “to control costs, grow capacity as needed, and get to market faster while ensuring HIPAA and PCI (credit card) compliance.”

Selecting a hybrid approach for security

“We have to be HIPAA compliant,” says Gregory. The service provider hosts its own database in its own cabinet to meet HIPAA security requirements; the company sends no data to the cloud. Instead, it uses the cloud solely to host its applications.

Duffy labels this “a hybrid hosted model.” Presidio Health firewalled all its sensitive data while sending only the front end to the public cloud. “If your underlying database requires a high level of security or compliance, it’s best to use a hybrid model,” he notes.

Moving to the Appistry/GoGrid solution increased Presidio Health’s computer power by 70 percent without increasing the budget, reports Gregory.

“This solution lets us grow while reducing our reliance on IT,” Gregory concludes. “We now know growth will be less painful as we continue to improve our offering.”

Lessons from the Outsourcing Journal:

One way small-to-medium sized businesses can weather growth spurts easier is to move their applications to the public cloud.

Enterprises that have to worry about security can adopt a hybrid hosted solution, which keeps the sensitive data firewalled in their facilities while sending the applications to the cloud.